Cartel Damages Claims and the Passing-On Defence
34 Pages Posted: 27 May 2008
Date Written: June 2007
Abstract
We develop a general economic framework for computing cartel damages claims. We decompose a direct purchaser plaintiff's lost profits from the cartel in three parts: the anticompetitive price overcharge (or cost effect), the pass-on effect and the usually neglected output effect. The pass-on effect is the extent to which the plaintiff passes on the price overcharge by raising its own price, and the output effect is the lost business resulting from this passing-on. To evaluate the relative importance of the three effects, we subsequently introduce various models of imperfect competition for the plaintiff's industry. We show that an adjusted passing-on defense (i.e. accounting for the output effect) is justified under a wide variety of circumstances, provided that suficiently many of the plaintiff's rivals are affected by the cartel. We derive exact discounts to the price overcharge, which depend on relatively easy-to-observe variables, such as the pass-on rate, the number of firms, the number of firms affected by the cartel, and/or the market shares. We finally extend our framework to assess the cartel's total harm (on purchaser plaintifs and consumers), further demonstrating the crucial importance of the output effect. Our results are particularly relevant in light of the recent developments in U.S. and European antitrust policies.
Keywords: cartels, damages, passing-on defence
JEL Classification: L40
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Illinois Walls: How Barring Indirect Purchaser Suits Facilitates Collusion
By Maarten Pieter Schinkel, Jan Tuinstra, ...
-
Should Private Antitrust Enforcement Be Encouraged in Europe?
-
Measuring the True Harm from Price-Fixing to Both Direct and Indirect Purchasers
By Leonardo J. Basso and Thomas W. Ross
-
The Limits of State Indirect Purchaser Suits: Class Certification in the Shadow of Illinois Brick
-
Cartel Damages Claims and the Passing-On Defense
By Frank Verboven and Theon Van Dijk
-
The Distribution of Harm in Price-Fixing Cases
By Jan Boone and Wieland Müller
-
The Distribution of Harm in Price-Fixing Cases
By Jan Boone and Wieland Müller